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An ounce of prevention is worth a pound of cure. It’s unlikely that Benjamin Franklin was thinking about vendor internal control processes when he made this observation, but his sage advice certainly applies. Today’s supply chain networks can be multi-layered and connected in ways not readily apparent. If a vendor’s internal controls break down, the ramifications can be far reaching – impacting not only the vendor’s immediate customer base, but also the suppliers of those organizations.
Recent news serves as a cautionary tale about understanding vendor internal control processes and monitoring them on a regular basis. That means vetting your vendors up front, ensuring that the correct controls are in place and external audits are being conducted by reputable parties.
How do you gauge the effectiveness of your vendors’ internal controls? Who within your organization has responsibility for managing this aspect of vendor relations? Are regular, thorough assessments being made? These are just some of the questions your organization should be asking itself.
The internal controls of freight payment vendors merit particular scrutiny. You need to be certain that your payment providers don’t use the cash you entrust to them for any other purpose but to pay your carriers. The same holds true for vendors that you entrust with critical data – particularly data that is sensitive or provides you with a competitive edge.
Having a grasp of the internal controls of your vendors is an issue across the breadth of the supply chain. Whether you contract with a carrier, a transportation management system provider, a freight payment vendor, or a 3PL, you have decided that an outside party can handle some aspect of your business more capably than you. Your thought process should include not just whether a partner can perform the duties stipulated in the contract but its underlying soundness, as well.
In today’s lean-running organizations, administrative activities like vendor process reviews can lose priority to seemingly higher-value activities. Preventing a problem from happening in the first place saves a great deal more in cost, time and reputation than trying to repair the damage later. My advice? Make time to understand and monitor the internal control processes of your critical vendors. It’s an investment that’s guaranteed to pay off. I look forward to discussing how U.S. Bank can help. Cheryl Garcia leads the U.S. Bank Freight Payment Global Relationship Management team, providing international payment solution expertise to both public and private sector customers. Cheryl combines more than 25 years of global transportation and supply chain optimization experience with MBA and BBA Finance degrees, and is a CPA and a Project Management Professional (PMP). Thoughts to share? Email or connect at linkedin.com/in/cherylgarcia1